superv. cont. chk list

DESIGNATION OF SUPERVISORS AND OFFICES

Date: ___________________ Reviewed By: ______________________________________________

SUBJECT(Sections in WSP Manual)

RULE REFERENCE(S) N/A

Tested By Frequency of review COMMENTS

Designation of Supervisors and Supervisory Duties For Each Supervisor (Including branch supervisors.)

[Are designations current? Are descriptions of areas of responsibilities accurate?]

FINRA Rule 3010(a)(2) – (4)

Designation of Executive Representative

[Is the designation to FINRA current?]

FINRA By-Laws Art. IV,Section 3, 1150

Designation of principal responsible for supervision of form filings

FINRA Rule 1140

]Assign each registered rep to a supervisor and create a record of all reps supervised by each supervisor

FINRA 3010(a)(5)

GENERAL EMPLOYEE POLICIES

Date: ___________________ Reviewed By: ______________________________________________

SUBJECT RULE REFERENCE(S) N/A


Outside business activities[Approval process; records retained]

FINRA Rule 3030;

Private securities transactions – FINRA[Approval process; books and records requirements if approval granted]

FINRA Rule 3040

Employee and employee-related accounts FINRA Rules 2010 & Rule 3010(d);

Review of transactions

Outside accounts

[Approval, monitoring]

FINRA Rule 3050

Sharing in customer accounts


FINRA Rule 2330(f)

Outside accounts


FINRA Rule 3010(c), 3050(d);MSRB G-28

Charitable contributions

[Approval, records]

FINRA Notice to Members 06-21;

Prohibited activities FINRA Rule 2370

Borrowing from/lending to customers

[Review of communications to identify] Guarantees

[Review of communications to identify]

FINRA 2330(e); MSRB Rule G-251

Annual certification [Annual attestation re outside business activities; outside accounts; private securities transactions; insider trading, etc.; obtaining, followup, records]

FINRA Guide to Written Supervisory Procedures

TRAINING AND EDUCATION

Date: ___________________ Reviewed By: ______________________________________________



Annual compliance meeting

[Records of content, attendance, confirming requirement met by RRs]

FINRA Rule 3010(a)(7)

Continuing education

[Developing annual firm element plan, controls to confirm employees complete required CE, restrict those who don’t]

FINRA Rule 1120; MSRB Rule G-3

Regulatory element

Firm element

Controls for persons who fail to complete requirements

Designating a CE contact person FINRA 1120(a)(7)

MSRB apprentices[Monitoring activities]

MSRB Rule G-3

EMPLOYMENT, REGISTRATION, AND LICENSING

Date: ___________________ Reviewed By: ______________________________________________



Hiring procedures

CRD clearance for new hires[Process for checking CRD] Background investigations conducted FINRA 3010(a)(6);

3010(e); MSRB G-7

Obtaining fingerprints and flagging responses

FINRA 1140(c)(2); SEC Rule 17f-2

Determining supervisors’ qualifications[Process for determining newly-hired or promoted supervisors are qualified by registration and experience]

FINRA Rule 3010(a)(6);

Termination procedures[Filing required U-5s with CRD within 30 days and sending copies to RRs]

FINRA By-Laws Article V, Sections 2 and 3;

Registration FINRA By-Laws Article V

Updating U-4s[Process for updating U-4s regarding reportable information] Confirming all RRs are properly registered[At time of hire, when RR is transferred, when RR expands business or location of accounts (state registrations)]

FINRA By-Laws, Article III, Section 2; 1070; MSRB Rules G-2 & 3; 1021; 1022; IM-1022-1; IM-1022-2; 1030; 1040; 1100; 1110

Maintaining records of associated persons SEC Rule 17a-3(a)(12)

Parking of securities registrations[Avoiding registrations not required and held only to avoid lapsing]

FINRA By-Laws, Article III, Section 1; Rule 1031(a)

Statutory disqualifications[Hiring and supervision]

’34 Act Sec. 3(a)(39) & Rule 19h-1; FINRA By-Laws, Article III,Sections 3 & 4; Form MC-400; Rule 3070; MSRB Rules G-4 & G-5

Screening for SD persons hired in clerical or ministerial positions

Supervision of SD persons



Broker-dealer registration Form BD [Current and filed on timely basis]

FINRA By-Laws Art. IV, Section 1

Regulatory contact information (FINRA)[Current?]Heightened supervision FINRA NTM 97-19,

03-49; Identifying RRs for heightened supervision[Criteria current? Records of review?] Records of heightened supervision[Memo to supervisor; records of reviews; supervisor certification]

COMMUNICATIONS WITH THE PUBLIC

Date: ___________________ Reviewed By: ______________________________________________



Advertising and sales literature FINRA Rule 2210, 2220; IM 2210-1; MSRB Rule G-21; SEC 17a3(a)(20)

Approval

[Ads approved and records retained?

Approved ads meet requirements?] Inclusion of SIPC [SIPC included on all print ads?] Filing requirements

[Required material such as mutual fund ads filed with SROs?]

Outgoing written correspondence SEC Rule 17a4(b)(4); 17a(3)(20);FINRA 3010(d);

Review and approval

Fax reviews

Incoming written correspondence

Review[Reviewed by designated person? Complaints referred to Compliance?] Institutional sales literature & correspondence[Exceptions to usual review/approval requirements only for qualified accounts?]

FINRA Rule 2211

Complaints FINRA Rule 3110; MSRB Rules G-18(a)(xii) and G-10

Review by principal

Copies to Compliance

Reporting to SROs FINRA Rule 3070; Customer privacy policies (Reg S-P) Regulation S-P

Provide initial, annual & revised privacy policy notices



How & when policy is distributed to customers

Administrative, technical & physical safeguarding of information; testing of firewalls

Scripts[Reviewed and approved? Records?]Calling restrictions Telephone Consumer

Protection Act of 1991; Junk Fax Protection Act of 1995; FINRA Rule 2212

Internal do-not-call list maintained and made available

Federal and state do-not-call information made available

Public Speaking[Approval process; records]

FINRA Rule 2210

Cold callers[Approved callers and scripts]

FINRA Rule 2210, 2212,3010(b)(2),3110(g)

Electronic communications Systems and devices approved

Education of employees

Opt-out procedures

Instant messaging ban or review of permitted access

Review of communications

[Training for reviewers; identity of items requiring prior approval; records of review] Retention of records in retrievable format

Firm web site

FINRA Taping Rule[Compliance with requirements to determine % of tapes to review, designate person to review, record reviews and retain records] [Only applies to firms designated by FINRA as subject to the Taping Rule.]

FINRA Rule 3010(b)(2);

FINANCIAL AND OPERATIONS PROCEDURES { Outside accountants may test some of these subjects if noted in “Comments”. Some areas may be the responsibility of a clearing firm, if so noted}

Date: ___________________ Reviewed By: ______________________________________________



Books and records SEC Rules 17a-3 & 17a-4; FINRA 3110; MSRB G-8 and G-9

Main office records

Branch records

[Required records retained in branches?]

Clearing firm records

[Is it clear re what records to be retained by clearing firm?]

Electronic storage of records

[Consistent with requirements?]

SEC Rule 17a-4(f)

Calculation and reporting of net capital

[Timely filings, accuracy]

SEC Rules 15c3-1, 17a-11; FINRA NTM

92-72, 93-30, 99-44

Reconciliations and bank records

[Reconciliations done, records retained]Financial reporting

[Financial statements sent to customers]

SEC Rules 17a-5 & 17a-11; FINRA Rule 2270

Part-time FINOP (if applicable)

[Meet regulatory requirements?

FINRA NTM 06-23]

Reg T and extension of margin[Calculation of requirements, notification, sellouts when required]

Regulation T; FINRA Rule 2520

Fees and service charges[Customer notification at time account opened; at least 30 days before changes; on web site]

FINRA Rule 2430;

Fidelity bonding[Current?]

FINRA Rule 3020;

Risk Management[Establishment of department or committee, reviews, records]

FINRA NTM 99-92;



New products[Review and approval, records]

FINRA NTM 05-26

Business continuity plan Identify Emergency Contact Persons Address data back-up and recovery Address mission critical systems Address periodic assessment of

financial and operational risks Address alternate communications

during emergency Address providing an alternate physical

location for employees Address the impact of disruption upon

critical counterparts Address regulatory reporting and

communications with regulators Provide for customers’ prompt access to

funds and securities in the event that firm is unable to continue its business

Address disclosure requirements of Rule 3510

Address the requirements for updating, annual review, and senior management approval provisions

FINRA 3510, 3520; NTM 04-37

Customer payments for purchases[Checks payable to clearing firm, if required]

Transmittals of customer funds and securities[Branch safeguarding of checks; transmittals to third parties or an alternate address]

FINRA Rule 3012(a)(2)(B);

Deliveries by RRs to customers [Approval, records]Safekeeping of customer funds and securities (Customer protection) Reserve computations Quarterly box count Safekeeping and segregation of customer

securities

SEC Rule 15c3-3;17a-13; 8c-1; 15c-1; 15c3-3; 17a-13. FINRA Rules 2330 & 3140;MSRB Rule G-25

Customer confirmations and statements SEC Rules 10b-10, 17a-3; FINRA Rule 2320, 2830; IM 2230; MSRB Rule G-15

Control of blank confirms and statements

Customer address changes – sending confirmation

FINRA Rule 3012(a)(2)(B);

Hold mail procedures FINRA Rule 3110(i);

Required disclosures on confirmations

Annual disclosure of FINRA BrokerCheck FINRA Rule 2280



Clearing agreements[Records]

FINRA Rule 3230;

Short interest report[Records, timely filing]

FINRA Rule 4560

Regulatory fees & assessments[Responsibility, payment]

FINRA By-Laws, Schedule A; MSRB Rules A-13 and

A-14Outsourcing[Review, monitoring of services, records]

FINRA NTM 05-48;

ANTI-MONEY LAUNDERING PROGRAM Bank Secrecy Act; USA PATRIOT Act; FINRA 3011; MSRB Rule G-41

NOTE: This entire section may be covered by the required independent testing, and if so, this is noted at the beginning of this section without further notations on the subjects included here.

Date: ___________________ Reviewed By: ______________________________________________



Designation of AML Compliance Officer FINRA Rule 3011(d), IM-3011-2

Independent testing[Conduct of independent testing of AML procedures, meeting requirements for independent tester]

FINRA Rule 3011(c), IM-3011-1;

Education of employees

OFAC list and blocked property[Accounts checked; accounts blocked if necessary]

Dept. of Treasury statutes; OFAC web site including lists of blocked persons/entities

Currency reporting requirements Identify cash transactions for filing CTRs Verify the identity of customers for filing

CTRs Filing CTRs

SEC Rule 17a-8; Bank Secrecy Act

Recordkeeping requirements

Fund transfers and transmittals Bank Secrecy Act 31 CFR Part 103; FINRA NTM 97-13, 96-67 & 95-69

Information sharing between financial institutions

USA PATRIOT Act, Section 314; Bank Secrecy Act

Annual FinCEN certification

Verification that institutions with whom information is shared have filed their certification

Suspicious Activity Reports (SARs)[Review of potential suspicious activities; filing reports; records]

SEC Rule 17a-8; USA PATRIOT Act Sec. 356; FINRA NTM 89-12, 97-13, 02-47

Requests and written notices from enforcement agencies[Responses to agency requests; records]

USA PATRIOT Act, section 314, and Bank Secrecy Act



Customer identification program (CIP)[Obtaining required customer information, records]

USA Patriot Act Sec. 326

Due diligence for correspondent and private banking accounts[Identifying accounts for extra due diligence; Compliance approval where required; monitoring accounts; bank certifications]

USA PATRIOT Act Secs. 312 & 313

Shell companies[identifying accounts, obtaining information, approval]

INSIDER TRADING ’34 Act Sec. 10, Rule 10b-5; Insider Trading & Securities Fraud Enforcement Act of 1988; FINRA NTM 89-5;

Date: ___________________ Reviewed By: ______________________________________________



Annual certification

Employee, employee-related and proprietary trading

[Reviews, records of reviews and action taken]Information barrier procedures

[Current and adequate reflecting Firm’s current businesses? How monitored and enforced? Education of employees?]Watch list

[Maintaining list, adding companies, monitoring, actions taken]

Restricted list

[Maintaining list, adding companies, monitoring, actions taken]

ACCOUNTS

Date: ___________________ Reviewed By: ______________________________________________



New accounts SEC Rule 17a-3(a)-(17);FINRA Rules 2310 & 3110(c); MSRB Rule G-8

Approval SEC Rule 17a-3(17)(i)(A); FINRA Rules 2310(b) and 3110(c);

Accounts for employees of other BDs[Notification to and approval from other BD, copies to other BD]

FINRA Rule 3010(c)(2)(C) & 3050; MSRB Rule G-28

Accounts for employees of FINRA and AMEX

[Notification, approval]

FINRA Rule 2070

SIPC disclosure at time of account opening and annually

FINRA Rule 2342;

Customer account information [Copy to customer at time of opening for affirmation and periodic affirmation]

'34 Act Rule 17a-3(17)(i)(A); FINRA Rule 3012(a)(2)(B);

Transferring accounts[Timely processing]

FINRA Rule 11870;

Account documents[Controls for obtaining required documents and follow up of deficiencies] ]Margin accounts[Approval of accounts; providing disclosure to customers]Third party accounts[Obtaining necessary authorizations]

SEC Rule 17a-4(b)(6)

Discretionary accounts[Requires investment adviser registration for the Firm; approval and review of accounts]

FINRA Rule 2510, 3110(c)(3); MSRB Rule G-19

Day trading accounts[Risk disclosures, approval, monitoring]

[FINRA Rule 2360]

Active accounts[Reviews]Concentrations[Reviews]

ORDERS

Date: ___________________ Reviewed By: ______________________________________________



Orders requiring approval[Types of orders that must be approved prior to entry; current in WSP?]

Suitability of recommendations[Are reviews being conducted to determine suitability? Does the Firm have special requirements for certain products and, if so, are those requirements fulfilled?]

FINRA Rules 2010, 2310, 3110(a); FINRA Rules 2720(k) –self underwritings; 2810(b)(2-DPPs; 2353 - index warrants; 2360(b)(19) – options;

NTM 96-86-Variable Annuities; MSRB Rule G-19

Fair prices[Processes for determining fairness of markups/markdowns, agency commissions]

Regulation NMS;FINRA Rules 2320, IM-2320 & 2400; MSRB Rules G-17, G-18, & G-30]

Best execution[conducting reviews. records of reviews, actions taken]

Regulation NMS

[Identifying trade-throughs; handling intermarket sweep orders; using third-parties to comply]

Trading ahead of customers (“frontrunning”)

[Controls to identify frontrunning]

FINRA Rule 2111, IM-2110-2

Account Designation and Cancels/Rebills

[Controls for identifying, approving changes in accounts on orders]

FINRA Rule 3110(j);

Trade Reporting By Third Parties[Processes for confirming third parties are reporting trades as required]

FINRA Rules 4630, 6000C, 7220A & 7320, 6200, 6400 and 6641

Trading systems and electronic transmission FINRA Notice to



of orders Members 04-66;

Customer Access To NASDAQ Order Entry Systems

[Written agreements, notifying NASDAQ, monitoring]

FINRA NTM 98-66

Order records[Confirming required records are retained]

'34 Act Rules 17a-3 17a-4; FINRA Rule 3110;

Conflicts of interest[Customer orders/fair prices compared to employee/firm trading]

Secondary Market Transactions In The Firm's And Its Affiliates' Securities

[Restrictions on recommending the Firm’s or an affiliates’ securities]

'34 Act Rule 17h-1T;

Review of transactions[Processes for reviewing customer transactions for compliance with rules]

SEC Rules 10b-5, 15c1-7; FINRA Rules 2010, 2020, 2130, 3010, IM-2110-1 & IM-2440; MSRB Rule G-27(c)

Trade errors[Processing errors, control & monitoring of error accounts]Time clock synchronization[Procedures to ensure time clocks are accurate]

FINRA Rule 7430

Blue sky of securities[Procedures to confirm solicited purchases of unlisted securities meet blue sky requirements]

[Various state blue sky requirements]

Certificates of deposit[Necessary disclosures when selling to customers]

FINRA Notice to Members 02-69;

REITs[Reviews for suitability]

Hedge funds[Due diligence, suitability; review of subscription agreements; training of RRs

FINRA NTM 03-07

Structured products[Due diligence; use of promotional materials; account eligibility; suitability; training of RRs]

FINRA NTM 05-59]

Short sales[Marking orders; locate and delivery requirements]

Regulation SHO

Sales of control or restricted stock SEC Rules 144 & 145



[Filing and trading requirements]Penny stocks(designated securities)

SEC Rules 15g(1)-(9), 15g1-100, 3a51-1; FINRA NTM, 92-38, 92-42, 93-55

Risk disclosure statement provided to customers

[2-day waiting period observed] Suitability

Confirmation disclosures

Payment for order flow[Written agreements; confirmation disclosures; new account and annual disclosures]

'34 Act Rule 10b-10, Regulation NMS Rule 607

Orders of behalf of a foreign BD[Determining BD not disqualified; written consent; Firm’s responsibilities]

SEC Rule 15a-6

FINRA Order Audit Trail System (OATS) FINRA 6950 series

Daily Clock Synchronization

Review of OATS data to confirm compliance

Disclosure of order execution procedures[Verify reports published]

Regulation NMS, Rule 605

Order routing and reporting[Verify reports published]

Regulation NMS, Rule 606

Cash and non-cash compensation policy[Verify compliance with requirements for any arrangements]

FINRA 5110, 2810, 2820, 2830; NTM 95-55, 95-56, 95-75

Prohibited transactions and practices[Verify reviews in place]

SEC Rules 10b-5, 15c3-1

FINRA Rule 2010 Unauthorized trading FINRA IM-2310-2; Parking securities

Churning FINRA IM-2310-2;

Frontrunning FINRA Rule 3380;

SUPERVISORY CONTROLS FINRA 3010, 3012, 3130, NTM 04-71 and 04-79; MSRB Rule G-27

Date: ___________________ Reviewed By: ______________________________________________



Small firm with limited size and resources[If applicable, establishing exception]Written supervisory procedures[Verifying procedures are current and reflect Firm’s businesses]

FINRA Rule 3012(a)(1); MSRB Rule G-27(c)

Distribution of procedures and amendments FINRA Rule 3010(b)(4)

Chief compliance officer[Designation]

FINRA Rule 3130;

Annual compliance report to CEO FINRA Rule 3012(a)(1)FINRA Rule 3130, IM-3013;

FINRA report[Verify filing]

CEO annual certification FINRA Rule 3130(b)

Supervision of producing managers’ customer account activity[Limited size exception, if applicable; identifying producing managers, assigning supervision, reviews conducted]

FINRA Rule 3012(a)(2)(A)

OFFICES FINRA 3010; NTM 86-65, 88-84, 89-34, 92-18, 04-71

Date: ___________________ Reviewed By: ______________________________________________



Office designations [Are offices properly designated?]

FINRA By-Laws Article IV Section 8, Rule 3010;

NOTE: List of offices appears in chapter DESIGNATION OF SUPERVISORS AND OFFICES.

Non-branch locations[Approval of persons to operate there; supervision]

FINRA Rule 3010(c), IM-3110-1, NTM 86-65, 04-71;

Supervision of producing managers[Is supervision being conducted? Is there followup when there are problems?]

FINRA Rule 3012;

New offices or changes in existing offices[Form BR filings made?]

FINRA By-Laws Article IV Sec. 8;

Use of office space by others[Do any arrangements exist? If yes, were they approved?]

Office records[Are required records retained in branches?]

SEC Rules 17a-3 and 17a-4

Office inspections[Are office inspections scheduled, conducted, reports issued?]

FINRA Rule 3010(c)(1

Limited size exception [Applies?]

FINRA Rule 3010(c)(3)

Heightened inspections of non-branch locations and other offices

[Are offices identified for possible heightened inspections? Are non-branches reviewed?]

Branch manager’s checklist[Are checklists being submitted?]Display of membership certificates[Are required certificates displayed in branches?]

Availability of rules[Are rules available in branches?]

Offices on bank or other financial institution premises[Are bank premises requirements reviewed? Is there compliance?]

FINRA Rule 2350; NTM 94-47, 94-94,

95-49, 97-26, 97-89

OTC EQUITY TRADING AND MARKET MAKING

Date: ___________________ Reviewed By: ______________________________________________




Registration of traders FINRA Rule 1022, NTM 00-46

Initial market making requirements (15c2-11)[Making required filings prior to initiating quotes in NNOTC securities]

SEC Rule 15c2-11;FINRA Rule 6440

Quotations[Testing compliance with quotation requirements]

; NASDAQ Rule 4613

Dissemination of quotations[Disseminating CQS quotes only if registered as a CQS market maker; if sole quote for an NMS stock, provide data to an information processor]

Regulation NMS Rule 602

Firm quotes FINRA Rule 6170(b)

Backing away FINRA Rule 3320, IM-3320; NASDAQ Rule 3320

Withdrawal of quotes NASDAQ Rule 4620 Locked and crossed markets NASDAQ Rule

4613(e)Fair prices/Best execution Regulation NMS

Best execution[Testing for best execution; documenting quotations for NNOTC transactions]

FINRA Rule 2320; NASDAQ Rule 2320; MSRB Rule G-18

Regulation NMS[Testing trade-through compliance, handling intermarket sweep orders (ISOs), testing compliance by conduits/third party vendors that handle orders]


Fair pricing[Testing for compliance with fair markups/markdowns, fair agency commissions, use of contemporaneous cost for dominated/controlled markets]

FINRA Rule 2440, IM-2440

Market orders[Testing for trading ahead of customer market orders]

FINRA Rule 2111; NASDAQ Rule 2111

Limit orders[Testing for compliance with display requirements, best execution]

Regulation NMS Rule 604; FINRA IM-2010-2, Rule 2111; NASDAQ IM-2110-2

Short sales[Marking orders, locate and delivery requirements]

Regulation SHO




Trading halts[Compliance with trading halts]

FINRA Rules 3340, 6120 & 6460; NASDAQ Rules 4120, 4121, & 6430

CQS securities[Reporting transactions, compliance with quotation requirements, compliance with 1% rule)

Regulation NMS Rules 600(b)(73)(ii), 601 & 602; FINRA Rule 4632

ADF FINRA Rule 6320A

Certification[Filed annual certification with FINRA?]

FINRA Rule 4200A(5) & 4300A

Registration as market maker FINRA Rule 4611A Access requirements Regulation NMS Rule

610; FINRA Rule 4300A

Quotation requirements Regulation NMS Rules 600(b)(3) & (37); FINRA Rule 4613A

Locking and crossing FINRA Rule 4130A

Withdrawal of quotations FINRA Rule 4619A

Trade reporting[Compliance with reporting requirements]

FINRA Rules 4630A, 7320A, 4720, 5430 6380A

System outages[Reported to FINRA and trades reported next day?]

FINRA Rule 4300A(f)

Other requirements Schedule 13G reports[Filed if required?]

SEC Rules 13d-1 & 13d-2

Authorized use of NASDAQ workstations[Access only to authorized persons, use of passwords] Errors[Control of error accounts, following clearly erroneous transaction procedures]

FINRA Rule 11890; NASDAQ Rule 11890

System outages[Reporting internal system outages to FINRA]Distributions of securities Regulation M

Passive market making[Compliance with passive market making when engaged in distribution] Stabilizing bids NASDAQ Rule 4614

Trade reporting[Testing for accurate trade reporting]

FINRA Rules 4632, 7220, 7240, 7320, 7330, 7340, 6400, 6550, and 6622

Reporting trades to ACT




Riskless principal transactions FINRA Rule 4632(d)(3)(B)

Trade reporting by third parties[Testing for third party’s compliance]Other reports Short interest report[Timely filings?]

FINRA Rule 4560; NTM 03-08

Disclosure of order executions[Data published?]


Clock synchronization[Daily checking, records]

FINRA Rule 7430;

Cell phones and PDAs[Limited to authorized use?]

Prohibited activities

Anti-competitive and antitrust activities SEC 21(a) report; FIINRA IM-2110-5; NASDAQ IM-2110-5

Trading ahead of research FINRA 2110-4; NASDAQ 2110-4

Books and records SEC Rule 17a-3(a);FINRA Rule 3110

CORPORATE FIXED INCOME SALES AND TRADING

Date: ___________________ Reviewed By: ______________________________________________



Tested By

Frequency of review COMMENTS

Fair prices[Test for fair markups/markdowns and agency commissions]

FINRA Rule2440, IM-2440-1

Markups/markdowns

Commissions on agency transactions

Errors[Controls for error accounts]Cancels and rebills[Changes in account designations approved?]

FINRA Rule 3110(d)

Extended settlements; delayed deliveries[Supervisor reviews, identifying patterns]

FINRA Rule 11320

Traders’ personal accounts[Compliance with personal trading policy]

TRACE[Testing for compliance with reporting rules]

FINRA Rule 6200

Procedures for clock synchronization[Daily testing, records]

FINRA Rule 6953

Prohibited activities

Frontrunning (research, trades) FINRA IM-2110-3

Adjusted trading SEC Rule 10b-5

Review of transactions[Required reviews conducted?]

FINRA Rule 3010

High yield debt securities[Suitability, research]

CORPORATE SECURITIES UNDERWRITING

Date: ___________________ Reviewed By: ______________________________________________



Deal file[Files established and maintained?]Managing underwriter responsibilities Due diligence SEC Rule 10g-5;

FINRA Rules 2310 & 2810

Underwriting compensation[Reviews for compliance with rule]

FINRA Rule 5110)

Prospectuses[Preparation, distribution, records]

'33 Act Secs 2(a)(10), 10-12; Rules 154, 174, 434 460; '34 Act Rule 15c2-8; Reg C, Rule 421

Regulatory filings FINRA Rule 5110, 5190, 2740, 6540, & 6760(b);

Road shows[Records; compliance with requirements for video and internet shows]Aftermarket activities[Stabilizing, penalty bids, syndicate covering]

Regulation M, Rules 100 & SEC Rule 17a-2; FINRA Rules 4614, 4624, 4625 5106;

Settlement of syndicate accounts[Records, timely settlement]

FINRA Rule 11880

Payments of concessions, discounts, allowances

[Paid only to registered BDs?]

FINRA Rule 2740

Designated orders[Records?]Syndicate member procedures[Tombstone ads, issuing research during distribution]

Selling group member procedures[Tombstone ads, issuing research during distribution]

Communications around the time of registered offerings[Test compliance]

'34 Act Section 5(a), Rules 134, 135, 163, 163A, 164, 168, 169 433, Release No. 34-52056



Sales to the public[Records of indications of interest; preliminary and final prospectuses provided]

Restrictions on purchases and sales of equity IPOs[Are restricted persons identified and precluded from buying IPOs? Certifications on file for non-restricted persons?]

FINRA Rule 5130

Trading restrictions while participating in a distribution[Securities added to restricted lists and violating trades identified and action taken? Short sales]

Regulation M; FINRA Rule 5190

Intrastate offerings[Issuers and purchasers qualified?]

'33 Act Sec. 3(a)(11), SEC Rule 147

Regulation S offerings[Sold only to qualified purchasers?]

Regulation S

Eurobond and foreign sovereign debt offerings[Purchasers qualified and sales suitable?]

Regulation A offerings[Are issuers qualified?]

Regulation A

Best efforts underwritings[Escrow requirements, closing the deal]

SEC Rules 15c2-4 & 10b-9

Offerings of the Firm’s or affiliate’s securities[Participation by the Firm, independent underwriter requirements]

'34 Act Rules 15c1-5 15c1-6; FINRA Rule 2720

Prohibited activities[Tying, laddering, quid pro quo, spinning, misrepresenting pricing]

'34 Act Rule 15c1-3; FINRA Rule 2760

CORPORATE FINANCE

Date: ___________________ Reviewed By: ______________________________________________



Engagements[Investment committee approval]Confidentiality[Information barrier procedures followed?]Regulation FD[Personnel aware of requirements?]

Fairness opinions[Disclosures included, approval of opinions]

FINRA Rule 5150

Personal trading of corporate finance personnel[Compliance with personal trading policies]

Recordkeeping[Records of banking deals]

Adding engagements to the Firm’s Watch or Restricted List[Compliance notified to add deals to lists?]

MUTUAL FUNDS

Date: ___________________ Reviewed By: ______________________________________________



Mutual funds offered by the Firm[Dealer agreements]Sales charges[Breakpoints monitored, LOIs, ROA observed]

FINRA Rule 2830(d)

Deferred sales charges[Confirmation legends]

FINRA Rule 2830(n)

Switching[Letters obtained?]

FINRA NTM 92016 & 91-39

Market timing transactions[Recommended? Limited to one family of funds?]

FINRA Notice to Members 95-80

Reinvestment of maturing CDs into mutual funds[Disclosures made to customers?]

FINRA NTM 93-87

Suitability[Review for suitable classes sold, reviewing mutual fund investments of customers of newly-hired RRs and transfers to new funds]

FINRA NTM 07-36 & 07-06

Late trading and market timing[Reviews to identify prohibited activity]

FINRA NTM 03-50

Block letter restrictions[Compliance with blocking letters]

Correspondence[Review, accompanied by prospectus]

FINRA Rule 2210

Seminars and other public presentations[Approved by supervisor, records]Sales contests and incentive programs[Approval by Compliance]Prompt transmission of applications and payments[Same-day transmission by RRs]

FINRA Rule 2830(m)

OPTIONS FINRA Rule 2860;

Date: ___________________ Reviewed By: ______________________________________________



Opening option accounts[Option agreements obtained, approved, providing disclosure document]

FINRA Rule 2360;

Option orders[Trading within approved levels; suitability]

FINRA Rule 2360

Disclosure of option order routing[Reports published?]


Reporting options positions FINRA Rule 2360

Position Limits / Exercise Limits FINRA Rule 2360

Branch copies of statements[6 months retained in branches)

FINRA Rule 2360

Option complaints[Central option complaint file]

MUNICIPAL SECURITIES

Date: ___________________ Reviewed By: ______________________________________________



Administration and operations

Apprentices[Observing 90-day period]

MSRB Rule G-3

Registration of principals[All municipal supervisors are properly registered]

MSRB Rule G-3

Control relationships[Disclosures]

MSRB Rule G-22

Electronic mail contact[Contact filed with MSRB and current?]

MSRB Rule G-40

Bank dealers[Separately identifiable department; referrals from non-registered bank employees; supervision]

MSRB Rule G-1

Sales of municipal securities

Suitability[Reviews, supervision]

MSRB Rule G-19

Required disclosures[Checks for material events, disclosure]

SEC Rule 15c2-12

Review of customer accounts

Complaints[Review and response, providing investor brochure]

MSRB Rules G-10 & G-17

MSRB rules[Availability of rules in each office conducting municipal transactions]

MSRB Rule G-29

College savings plans (Municipal Fund Securities)

FINRA NTM 03-17

Registration[Principals, RRs] Disclosures[Official statements/program disclosure documents provided?] SuitabilityReviews conducted for out-of-state plans, investment objectives vs. underlying investments?] Advertising[Approvals obtained?]

SEC Rule 482; MSRB Rule G-21(e)

Sponsoring meetings and conferences involving issuer officials[Review & approval, letter to sponsor]

MSRB Notice 2007-13

Advertising and sales literature MSRB Rule G-21



[Compliance with requirements, review & approval]

Underwriting Disclosures SEC Rule 15c2-12

CUSIP numbers MSRB Rule G-34

Expenses[Reasonableness]

MSRB Rules G-17 & G-20

New issue dales during underwriting period MSRB Rule G-11 Contingency offerings[escrow account, closing the deal]

SEC Rules 10b-9 & 15c2-4

Records MSRB Rules G-8 & G-9

Official statements[Providing statements to dealers, purchasers, others]

MSRB Rule G-32

Filings of OSs and advance refunding documents with MSRB

MSRB Rule G-36

Financial advisor activities MSRB Rule G-32

Registration requirements

Written agreements

Underwriting activities[Terminating financial advisor relationship, disclosures to issuer and purchasers, remarketing activities] Records MSRB Rules G-7 &

G-8Solicitation of municipal securities business[No prohibited payments to affiliated persons]

MSRB Rule G-38

Trading and handling customer orders

Quotations MSRB Rule G-13

Fair prices[Prices reasonable, markups/markdowns, agency commissions]

MSRB Rule G-30

Records of orders MSRB Rule G-8

Reports of transactions[Orders reported as required]

MSRB Rule G-14

Errors[Reviews, prompt corrections] Cancels & rebills[Review & approval of changes in account designations] Traders’ personal accounts[Compliance with personal trading policy,



reviews]Prohibited activities Parking securities

Adjusted trading

Gifts[Review and approval, records]

MSRB Rule G-20

Sales contests[Written agreement with sponsors, review & approval]

MSRB Rule G-20.20

Political contributions MSRB Rule G-37

Review & approval

Look-back/look-ahead[Identifying employees’ prior contributions that subject Firm to restrictions; imposing restrictions] PACs[Firm/affiliates’ PACs comply with limitations] Records

Quarterly report to MSRB[Filed?} Business restricted, if required because of

contributions?

GOVERNMENT SECURITIES Government Securities Act Amendments of 1993, Sections 102-107, SEC Rules 10b-5, 17a-3; FINRA NTM 95-48, 96-66

Date: ___________________ Reviewed By: ______________________________________________




Government Sponsored Enterprise (GSE) distributions Delivery of offering materials Prospectuses

Master agreements

Single class TBAs[Disclosures on confirmations]Sales and trading

Suitability

Fair prices[Markups/markdowns, agency commissions]

Traders’ personal accounts[Compliance with personal trading policies, review]

Review of transactions[Reviews conducted? Reviews done for potential prohibited activities?]Transaction records Government

Securities Act Amendments of 1993 Section 103

Large position reporting Government Securities Act Amendments of 1993 Section 104

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)

Date: ___________________ Reviewed By: ______________________________________________




Suitability[Reviews, disclosures to customers]

FINRA IM 2110-8(b)(2)

Required education material[Prior to sales to retail customers, provide brochure]

FINRA IM-2210-8(b)(2)

Inverse floaters, IOs, POs[Suitability, reviews]

Communications with the public[Compliance with requirements, review & approval]

FINRA IM-2110-8

Trading

Fair prices[markups/markdowns, agency commissions]

FINRA Rule 2440, IM-2440

Errors[Control of account] Cancels & rebills[Review & approval of changes to account designations] Traders’ personal accounts[Compliance with personal trading policies, review]

Confirmations[Disclosures]

SEC Rule 10b-10

FINANCING TRANSACTIONS

Date: ___________________ Reviewed By: ______________________________________________




Repurchase and reverse repurchase transactions

SEC Rules 15c3-1, 15c3-3(b)(4)

Written agreements

Hold-in-custody repurchase transactions

Confirmations

Collateral[Review and approval Deficits and margin calls

Mark to market

Dollar rolls

Order records

Repurchase transaction rates[Changes in rates recorded] Credit approval

Bonds borrowed and loaned transactions SEC Rule 15c3-3(b)(3)

Agreements

Collateral

Mark to market

Credit approval

RESEARCH – EQUITY SECURITIES FINRA Rule 2711;

Date: ___________________ Reviewed By: ______________________________________________



Registration and supervision of research analysts[Qualification of analysts and supervisors]

FINRA Rule 1050;

Continuing education FINRA Rule 1120;

Research analyst compensation[Limitations, approval]

FINRA Rule 2711(d)

Confidentiality of research activities[Maintain confidentiality of research reports prior to publication]Information barriers[Limits on communications between departments]

FINRA IM-2110-4

Regulation FD[Personnel knowledgeable of requirements?]

Regulation FD

Standards for research reports FINRA Rule 2210

Disclosures and statements[Required disclosures on research reports]

FINRA Rule 2711(h))

Analyst certifications Regulation AC

Third party research FINRA Rule 2711(h)(13)

Public appearances of research analysts

Approval

Disclosures FINRA Rule 4711(h)

Communications regarding investment banking services[Compliance with limitations, Compliance Dept. as go-between and records of communications, prohibition against analyst participation in roadshows]

FINRA Rule 4711(c)(5)

Blue sky of securities recommended[Determining blue sky status of unlisted securities in recommendations; legends added if needed]

Various state blue sky requirements

Review of research reports



Small firm exemption[If applicable, determining qualification and compliance with requirements]

FINRA Rule 2711(k))

Subject company communications[Limitations]

FINRA Rule 2711(c);

Approval of reports

Retention of reports and backup materialsQuiet periods affecting research reports and public appearances

FINRA Rule 2711(f);

Quiet period [Observance of restrictions on issuing reports]

One-day restriction[Imposition of internal restriction against acting on recommendations] Watch or restricted list additions[Notifying Compliance; adding security to lists to impose one-day restriction] Monitoring restrictions

Termination of coverage[Final report issued]

FINRA Rule 2711(f)(5);

Personal trading of research analysts[Compliance with personal trading policies; review]

FINRA Rule 2711(g);)

Prohibitions Soliciting investment banking business Changing inventory positions in advance of

research report

Frontrunning a research report[Reviews to identify, actions taken]Annual attestation of research supervisory procedures[Required attestations filed annually]

FINRA Rule 2711(i);

DIRECT PARTICIPATION PROGRAMS (DPPs) FINRA Rule 2810

Date: ___________________ Reviewed By: ______________________________________________



New issues FINRA Notices to Members 04-50, 04-07 95-63

Due diligence

Investment committee approval Suitability[Establishing standards, determining purchasers are qualified]]

FINRA Rule 2310

Subscription agreements[Obtaining, reviewing]

Prospectuses

Disclosures FINRA Rule 2810(b)(3)

Rollups[{Agreement with general partner; disclosure letter to limited partners]

FINRA Rule 2810(b)(6) & NTM 94-70

Secondary market transactions FINRA NTM 91-69

Trade records

Reporting transactions FINRA Rule 6920

Standard transfer forms[Obtaining forms when necessary]

FINRA NTM 96-14

INVESTMENT ADVISERS

Date: ___________________ Reviewed By: ______________________________________________




Investment adviser activities must be authorized[Only authorized RRs engage in IA activities]Recommending investment advisers[RRs must recommend IAs from Firm list of approved IAs]Registration requirements[Firm required to register as an IA?]

Fee-sharing arrangements

Wrap fee programs

Firm list of eligible IAs

Fairness of fees

Written agreements on file for customers Disclosure document provided to customers Periodic reports provided to customers Reviewing wrap fee accounts

Communications regarding performance include effect of fees

Adviser compensation arrangements[Included in customer agreements]

INDEPENDENT CONTRACTORS FINRA NTM 01-80, 99-95, 98-38, 86-65;

Date: ___________________ Reviewed By: ______________________________________________




Supervision[Records of IC supervision]Agreements[Written agreements with RRs]Use and display of the Firm’s name[Proper use by ICs]

Display of SIPC symbol[Displayed by IC?]

Use of other names[Approvals on file?]

ICs as investment advisers[Approved? Supervision?]

FINRA Rule 3040, Notices to Members 96-33, 94-44 91-32

Exempt insurance products and equity-indexed annuities[Approval from Compliance]

FINRA NTM 05-50

PRIVATE PLACEMENTS AND OFFERINGS

Date: ___________________ Reviewed By: ______________________________________________



Blue sky requirements[Procedures followed to verify blue sky status]

The Firm’s participation in private placements[Agreement with issuer, due diligence, integration issues, Form D]Sales of private placements[Suitability, purchaser questionnaires, offering memorandum, subscription agreements]

Contingency offerings[Escrow account, closing the deal]

'34 Act Rules 15c2-4 10b-9

1031 tax-deferred exchanges Section 1031 of the Internal Revenue Code, IRS Revenue Procedure 2002-22; FINRA Notice to Members 05-18

Internet offerings[Qualifying purchasers, disclaimers and other information on the web]

Rule 144A transactions[Determine QIB qualifications, disclosure letter]

SEC Rule 144A

Private investment in public equity (PIPE)[determine accredited status of investor, disclosures]

SOFT DOLLARS [’34 Act, Section 28(e)]

Date: ___________________ Reviewed By: ______________________________________________



Agency and riskless principal transactions[Principal transaction not allowed?]

Research services[Only allowed services included in arrangement]Brokerage services[Only allowed services included in arrangement]

Broker-dealer obligations[Compliance with requirements, letter to adviser]

Third party services[Only qualifying services provided, review and approval]

Commission-sharing arrangements[Comply with requirements]

Approval of soft dollar arrangements[Approval, maintain list of arrangements]

Statements[Annual statement to IA re services provided and commitment to pay soft dollars]

Review of accounts

SUBJECT:

Date: ___________________ Reviewed By: ______________________________________________



superv. cont. chk list

Documents

supervision rule

supervisory finra rule

educationfinra rule

emsrb rule g

finra 1140c2responses

registration finra

business activitiesfinra

customer accountsfinra